The CFPB publicly acknowledged yesterday their interest in innovation in consumer financial services by launching Project Catalyst, as already reported in this blog. It is quite the departure from precedent for a banking regulator to actually express interest in being supportive of new technologies and how they could improve consumer financial services. For practitioners like me, who work closely with financial institutions to help them implement new technologies in the consumer space, this is an exciting announcement, although tinged with concern about the CFPB’s good intentions potentially causing more delay in technologies actually getting to market.
As part of the CFPB’s Project Catalyst initiative – presumably the pet name of “Catalyst” implies that they hope to be a “catalyst for change” – the CFPB flings open its doors and asks innovators to come charging in with their fantastic financial technology innovations so that the CFPB can evaluate, examine and eventually, one supposes, opine.
I actually spoke with CFPB staff some months ago about the biggest hurdles that I see in financial services technology innovation. I talked about how ESIGN and its uneven implementation through the consumer regulations is a big hurdle and, given the general regulatory environment, how important it is to take the time to understand the privacy implications of the technology before racing to the consumer market with it. One question they asked me was whether I thought it made more sense for them to work with the financial institutions on the technological innovations they were looking to implement, or for the CFPB to focus on the technology providers themselves.
My opinion? I think that they use their resources most effectively by working with the financial institutions that have sifted through the various technologies themselves and chosen the most attractive, most viable, most effective technologies to invest time and money in. There are lots of fantastic ideas out there – from what I see, the U.S. is still a hotbed of innovation – but, if there is no market for the technology, then spending precious resources on examining it is wasteful.